Part 5 of 7
Technology is the “T” in PESTEL. Technological factors have a critical macroeconomic influence on a business’s operations, its products, how it delivers its services, and even its markets.
Technology encompasses innovation, automation, obsolescence, and R&D – and not just yours: it includes how competitors use technologies and, very importantly, how your market embraces and accepts technological change.
According to Jake (a technology tutor on testquestions.org), technological factors can influence the decisions you make when considering entering a new market and launching a new product or service. Indeed, technology has placed market research within reach of even the smallest businesses. It is critically important that you monitor technological factors no matter what business you are in and be prepared to respond quickly to changes.
What Are Technological Factors?
The table below lists just some of the topics that you might want to consider when evaluating technological factors:
Using AI for Your PESTEL Analysis
This article was initially published in 2019, not before AI but well before artificial intelligence became the hottest topic to discuss and use in the tech sector. In updating this article in Q4 2023, we couldn’t ignore the importance of AI in developing an informed PESTEL analysis. We asked ChatGPT how AI could be used in a PESTEL analysis, and here was its response:
Examples of the Impact of Technological Factors
- Recently, we worked with a client in East Africa who is a designer, manufacturer, and retailer of workplace fashions with an African theme. The client needed our help to assess how to reach an untapped market of potential US, UK, and European customers who closely identify with their African roots. Should the client open stores in New York, London, and Paris? A PESTEL analysis that we prepared suggested that utilizing the technology available to launch an e-commerce website was the most cost-effective way to enter these markets and, in doing so, measure market acceptance.
- An IT support firm with hundreds of individual and small business customers wished to increase its efficiency while at the same time providing better customer service. For example, each time they assisted a client, they had to send an invoice and charge the invoiced amount on the client’s credit card. The problem was that they had to ask for the credit card number each time they created an invoice. Customers could not understand why they couldn’t keep each client’s card number on file. After all, it works for Amazon and American Airlines. The problem was that their merchant processor did not allow them to keep cards on file. They solved their problem by moving to a new merchant processor that required them to install software that protected customer information such as credit cards and other sensitive business information.
- We know of a company that badly needed to increase its staff to keep up with the continuously rising demand for its products. By investing in new enterprise software (time tracking) combined with enhanced mobile communications, they could increase staffing by hiring highly qualified people who preferred to work at home or were located across the country or the globe. To better understand the benefits of remote working and how technology makes this possible, we suggest you read “Remote” by Jason Fried and David Heinemeier Hansson.
- A client recently asked us to assist with a benchmarking exercise that would enable him to compare the operating expenses (as a percentage of revenue) of a hospital business in the U.S., Saudi Arabia, and the UAE. AI will enable us to reduce the time required to complete the exercise dramatically.
The four situations described above represent how technology helped solve a business problem. However, it is essential to remember that nothing happens in a vacuum. Business is complicated, and therefore, when you think that just one idea or solution can solve a problem, it is a good idea to run the problem and the solution through a PESTEL analysis to see if the solution creates new problems or if better solutions present themselves.
This is Part 5 of our series on PESTEL analyses. Go to Part 4 here. Our next post in this series will be on the Environmental factors to be considered in a PESTEL analysis.
Other Articles in the PESTEL Analysis Series
- Put Your PESTEL to the Mettle (Part 1 of 7)
- Political Factors in your PESTEL Analysis (Part 2 of 7)
- Economic Factors in your PESTEL Analysis (Part 3 of 7)
- Social Factors in your PESTEL Analysis (Part 4 of 7)
- Technological Factors in your PESTEL Analysis (Part 5 of 7)
- Environmental Factors in Your PESTEL Analysis (Part 6 of 7)
- Legal Factors in Your PESTEL Analysis (Part 7 of 7)